Virgin Money, the institution that owns the former Clydesdale Bank, has reached a preliminary agreement for a £2.9 billion takeover bid by Nationwide Building Society that would create a larger rival to the UK's major lenders.

Nationwide boss Debbie Crosbie, a former senior executive at Clydesdale Bank, announced this morning that the building society is prepared to offer 220p for each share in Virgin Money. A planned 2p dividend payment to Virgin Money shareholders would also go ahead.

Nationwide noted that this is a 38% premium on Virgin Money’s closing share price on Wednesday.

READ MORE: Former Clydesdale Bank warns further jobs will go under cuts plan

Nationwide will extend its “Branch Promise” to Virgin Money – to retain a branch everywhere where the combined group is present until at least the start of 2026, adding that it “values Virgin Money’s ongoing presence in Glasgow and Newcastle”. 

Virgin Money has slashed its branch network by around 30%, reducing the total to 91, and cut its office footprint by around 35% in a restructuring programme that was completed in the first quarter of this year. The group had said in February that there would be “further opportunities for property rationalisation”, citing the example of its Glasgow head office consolidation.

Nationwide said it does not intend to make any material changes to the size of Virgin Money’s 7,300-strong workforce “in the near term”. Nationwide will remain a mutual building society if the deal goes ahead, with the plan to keep both brands initially before Virgin Money is rebranded as Nationwide within six years.

If the deal goes ahead, the combined group will have the second-largest branch network in the UK behind Lloyds HBOS. It would also be the second-largest mortgage provider in the UK, overtaking NatWest.

“We believe the combination would create a stronger and more diverse business that will be better placed to deliver value to our members and customers, both now and in the future," Ms Crosbie said.